INFONOMICSHow to Monetize, Manage, and Measure Information as an Asset for Competitive

Advantage

D OUG LAS B . LANE YGartner, Inc.

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Acknowledgments ix

Foreword xiii

Introduction 1

Part I Monetizing Information as an Asset 5

Chapter 1 Why Monetize Information 7

Chapter 2 Prime Ways to Monetize Information 27

Chapter 3 Methods for Monetizing Information 51

Chapter 4 Analytics: The Engine of Information Monetization 77

Part II Managing Information as an Asset 99

Chapter 5 Information Management Maturity and Principles 101

Chapter 6 Information Supply Chains and Ecosystems 117

Chapter 7 Leveraging Information Asset Management Standards and Approaches 139

Contents

viii Contents

Chapter 8 Applied Asset Management for Improved Information Maturity 163

Part III Measuring Information as an Asset 191

Chapter 9 Is Information an Asset? 193

Chapter 10 Who Owns the Information? 207

Chapter 11 Quantifying and Accounting for Information Assets 227

Chapter 12 Adapting Economic Principles for Information 257

Chapter 13 Infonomics Trends 271

Appendix A Information Management Maturity Challenges 281

Appendix B Sample Legal Rulings Related to Information Property Rights 287

Index 291

About the Author 293

When I was a young boy, one sweltering night in Deerfield, Illinois, just as I was falling asleep my father burst into my room, “Douglas. Get up. It’s time. You need to see this.” Normally my mother would have protested, but not for this.

I followed my father down to the family room where we sat in silence in front of our 12-inch black-and-white Zenith television. He turned to me and said, “Don’t ever forget you saw this.”

We watched for several minutes while my father continued to adjust the rabbit-ear antennae. Eventually on our tiny TV, a little white blob emerged from a bigger grayish blob, descended a bit, and a crackly voice announced: “That’s one small step for [a] man, one giant leap for mankind.”

I’m sure my dad was choked up. I just thought this was neat, really neat, but of no surprise. Most nights I went to sleep in spaceman pajamas beneath solar system bed sheets, fully anticipating this moment.

Several hours earlier, the world had watched Neil Armstrong override a lack of sufficient information on the lunar landing site to avoid a field of boulders. With only seconds of fuel remaining he touched down the Eagle safely on the surface of the moon.

Dad worked for a global medical device manufacturer. With his black horn-rimmed glasses, flat top haircut, and white short-sleeve button down shirts often sporting a pocket protector, it occurred to me he could pass for a NASA mission control specialist. Instead, he was a world-class engineer with several patents to his name. In that moment, our excitement wasn’t because

Introduction

2 INFONOMICS

of the technology. Dad would have been able to coolly tell you how all of the transistors, circuitry, activators, compressors, and other electromechanical components in the lunar lander worked.

“Isn’t it incredible that we can see and hear this as it’s happening?” he exclaimed. What truly thrilled my father was not the fact that mankind had the technology to land a man on the moon but that multimedia information about it was streaming into our family room for his son, for him, and for a billion others around the world to witness—live.

Since then, it seems that information—a fascination with it, the pursuit of it, and ultimately a career producing and delivering information about information—has been a common thread for me. I have never been all that fascinated with technology or even software, but more so by what fuels them.

As a kid I memorized gravitational, size, and distance fact tables about the planets, and devoured books on and tried my hand at cryptology. As a teen I got into coding, developing table-based approaches to video game development, and at the University of Illinois, a differential equations class frightened me out of the mathematics program and into developing an inde-pendent degree in software engineering and business administration. This despite the protests of the engineering school administration: “Why would anyone want to use computers for business?”

As an IT industry analyst, first with Meta Group and now Gartner, I have a front row seat to witnessing and advising organizations in their ongoing tussle with the unrelenting onslaught and infinite opportunities of informa-tion. Technologies and techniques seem to be perpetually a half-step behind the increases in the volume, velocity, and variety of information. More dis-concerting to me is that the overall perception of and approach to informa-tion has not kept pace with its economic significance.

Sure, many senior executives talk about information as one of their most important assets, but few behave as if it is. They spend more money track-ing their company’s office furniture and PCs than their information assets. They report to the board on the health of their workforce, their financials, their customers, and their partnerships, but almost never the health of their information assets. They squeeze every drop of value out of employees, bud-gets, and raw materials, while allowing most information assets to languish.

Introduction 3

Much of this oversight has to do with what is deemed to have meaning-ful value to the standard bearers of corporate measurement: the accounting profession. But in today’s Information Age, an antiquated regulatory pro-hibition against formally recognizing information on your balance sheet is a poor excuse for failing to monetize, manage, and measure information as a true asset.

This book is a call to such executives—for chief executive officers (CEOs) and business leaders to more fully wield information as a corporate asset, for chief information officers (CIOs) to improve the flow and accessibility of information, and for chief financial officers (CFOs) to help their organiza-tions measure the actual and latent value in their information assets. More directly, this book is for the burgeoning force of chief data officers (CDOs) and other information and analytics leaders in their intrepid struggle to help their organizations become more infosavvy. This book is a set of new ideas, frameworks, evidence, and even approaches adapted from other disciplines to help them transform their organizations.

Infonomics is a broad concept I conceived and first mentioned around the turn of the millennium to express information’s increasing behavior and importance as an economic asset. Over the years I have continued to research and develop the concept—exploring, relating, and integrating the disciplines of information theory, accounting, asset management, property ownership and rights, measurement, innovation, and economics. This has taken me from working with and interviewing clients, colleagues, information consultants, valuation experts, accountants, economists, and academics on these topics—to the depths of reading hundreds of pages of accounting standards body discus-sion papers on the recognition, and valuation and reporting of intangibles.

As such, infonomics is at once a conjecture and a construct. Each of these above ideas I have endeavored to recast in the context of information itself, and render practicable. Whatever your role, I hope you find each of the three parts of this book (monetizing, managing, measuring) beneficial to you. Certain readers will find one part more useful or interesting to them than another. Regardless, I appreciate you joining me on this infonomics journey. And a journey it is. I’m anxious to learn about the new ideas, methods, and achievements this book inspires.

Take the A1081 heading towards Harpenden and St. Albans. After about two miles you will come to a mini roundabout, carry straight on towards Harpenden. Take the first turn on the left after a quarter-mile, signed “Thrales End Lane.” After another quarter-mile the road takes a sharp right hand-bend, just before this corner there is an entrance on your left hand side signposted “Thrales End Business Centre.”1

You are now at the farm of Ian Pigott somewhere in Hertfordshire, Eng-land. This wheat, oats, and barley farm may be at the “end of Thrales,” but it’s at the forefront of monetizing information.

Pigott watches as his autonomous 11-ton John Deere tractor thunders across two thousand acres of farmland every week or so. It is guided by infor-mation coursing back and forth from a satellite—directed by information from weather forecasts, soil readings, pesticide use, and plant samples—and streaming nutrition and other information to the farmer’s tablet. From a comfy chair in his office, Pigott can monitor and manage the entire opera-tion, in real time, down to the square meter. Other similarly tricked-out farms use drones to survey for crop stress or flooding, sense and locate under-ground aquifers, precisely portion out animal feed, and use infrared cameras to identify flock fevers indicative of bird flu.2

Due to information-fueled analytics and information, farming has become just another white-collar desk job. Sure, kicking back, putting up your feet, and running a farm may be cool—but let’s “follow the money,” as they say.

CHAPTER 1

Why Monetize Information

8 INFONOMICS

Despite the 800% increase in the cost of these sensor-loaded, intelli-gent combines and other ag-gadgetry, farms also like Tom Farms in Indiana benefit from a 50% increase in profits. The ability to farm twenty thousand acres today versus seven hundred acres in the 1970s with the same number of employees no doubt is a major contributing factor. How about eliminat-ing the need for crop diversification to hedge against weather, disease, and market conditions? Information about markets, soil, and weather, combined with precision information-driven efficiencies enable the farmer to grow whatever will be most profitable.3

Moving up the economic food chain, do you think the farm equipment manufacturers like Deere and Caterpillar simply are profiting from their computerized crop creators? Hardly. They’re capturing data from them to help maintain and service them, get smarter about conditions and opera-tions, design the next generation of equipment, sell more of it, and license to seed and fertilizer companies like Monsanto and Archer Daniels Midland. In turn, these companies use the information to develop new agricultural products, and even to identify farms illegally using them. And ultimately grocery stores, restaurants, and consumers benefit from higher quality prod-ucts and lower prices.

Looking across several levels of this agricultural supply chain, we can identify a parallel information supply chain in which information is used to:

• Improve operational efficiencies,• Improve maintenance,• Improve production,• Improve quality,• Improve sales,• Improve product development, and• Improve business relationships.

Each of these capacities represents a discernible, discrete economic benefit in which information can be monetized, managed, and measured. And when any of these go unattended, you’re leaving money on the table. This is what infonomics aims to solve.

Why Monetize Information 9

Monetize, Manage, and Measure Your Information

Infonomics is the theory, study, and discipline of asserting economic signifi-cance to information. It provides the framework for businesses to monetize, manage, and measure information as an actual asset. Infonomics endeavors to apply both economic and asset management principles and practices to the valuation, handling, and deployment of information assets.

As a business, information, or information technology (IT) leader, chances are you regularly talk about information4 as one of your most valu-able assets. Do you value or manage our organization’s information like an actual asset? Consider your company’s well-honed supply chain and asset management practices for physical assets, or your financial management and reporting discipline. Do you have similar accounting and asset management practices in place for your “information assets?” Most organizations do not.

When considering how to put information to work for your organiza-tion, it’s essential to go beyond thinking and talking about information as an asset, to actually valuing and treating it as one. The discipline of info-nomics provides organizations a foundation and methods for quantifying information asset value and formal information asset management practices. Infonomics posits that information should be considered a new asset class in that it has measurable economic value and other properties that qualify it to be accounted for and administered as any other recognized type of asset—and that there are significant strategic, operational, and financial reasons for doing so.

Infonomics provides the framework businesses and governments need to value information, manage it, and wield it as a real asset. Aptly, the topic coincides with the objectives and responsibilities of one of the hottest roles in businesses today: the chief data officer, or CDO. Most of the thousands of CDOs appointed in the past few years have been chartered with improving the efficiency and value-generating capacity of their organization’s informa-tion ecosystem. That is, they’ve been asked to lead their organization in treating and leveraging information with the same discipline as its other, more traditional assets. This book is for them.

10 INFONOMICS

This book also is for CEOs who want to guide their organizations from just using information to weaponizing it. It is for CIOs who want to trans-form their organizations from regarding information as “that stuff IT man-ages” in to a critical business asset. It’s also for the CFO who is heads-up to the economic benefits of information, but is looking for ways to better understand, gauge, and financially leverage these benefits. And this book is also for the enterprise architect who wants a new set of tools to create novel information-based solutions for the organization, and for academics in busi-ness and computing sciences forming and shepherding the next generation of leaders into the Information Age.

This book is structured in three parts to provide a comprehensive guide for how to monetize, manage, and measure your information (Figure 1.1). First, we’ll examine why information affords unique opportunities to mon-etize it both directly and indirectly and give you a range of examples to help justify the business case for monetizing your organization’s information. This first section on monetizing information as an asset provides the justification, inspiration, and execution methods and closes out with an examination of advanced analytics and how to exploit Big Data for monetizable insights.

Figure 1.1 Infonomics

Why Monetize Information 11

The Possibilities of Information Monetization

Let’s dispel the notion right away that information monetization (Figure 1.2) is just about selling your data. It’s much more than that. In today’s information economy we see a range of possibilities: information is used as legal tender (or at least in place of legal tender in many kinds of transactions); information most certainly is used to generate a profit—and not just by Google, Facebook,

Figure 1.2 Infonomics—Monetize Information

In part II, we’ll tackle the challenges and best practices for managing your internal and external information as an asset and how to structure your organi-zation and roles to build an infosavvy organization. This section on managing information as an asset addresses the barriers to doing so, provides new ways to approach information asset management, and suggests a set of “Generally Accepted Information Principles” for doing so. Part III breaks down the current limitations to measuring information as an asset while offering new tools to measure the various benefits and costs of information. It also provides specific information valuation models and adapts key economic principles to help you begin quantifying and realizing the benefits of your information assets.

12 INFONOMICS

and the rest of the digerati, but by just about every business in every indus-try today with even just a copy of Excel—and information is regularly con-verted into money by a growing marketplace of household-name data brokers such as ACNielsen, Bloomberg, and Equifax, and by upstarts like Tru Optik, AULIVE, and hundreds (perhaps thousands) of others.

The imperative to monetize information in traditional businesses in all industries has become palpable. A 2015 Gartner study found that among the top ten Big Data challenges, respondents cited “how to get value from Big Data” as the number one challenge three times more often than any other challenge. Value challenges are cited five times more often than staffing related, leadership, or infrastructure/architecture challenges, and three times more often than risk or governance issues. By 2016, the same survey revealed a shift from how to get value to “determining value” as the biggest challenge—an indica-tion of the need to measure the outcomes (which we’ll deal with in chapter 12).

The range of ways for any organization to monetize information is nearly endless. In chapter 2 we’ll examine in detail several inspirational real-world stories of information being monetized across industries and business func-tions. The remainder of this chapter challenges the common myths that prevent information monetization within an organization, and presents opportunities to leverage information’s unique characteristics for real economic benefit.

Top Information Monetization Myths

Even with many well-publicized stories, several information monetization myths create cognitive roadblocks that hinder business leaders from realizing anything near the full promise of information:

• Information must be sold to be monetized,• Monetization requires an exchange of cash,• Monetization only involves your own information,• Monetized information typically is in raw form,• One must be in the information business to monetize information,• Few others would want our information, and• It’s best for us just to share our information with our suppliers and

partners.

Why Monetize Information 13

As a way to cleave through the cerebral fog of these myths, let’s first explore some key reasons why monetizing information is not only an excellent idea, but an increasing imperative for businesses.

Endless Economic Alternatives for Information

The first mental roadblock to monetizing information is a failure to think beyond selling it. It’s best not to get painted into that corner, lest you limit the economic potential of your information assets. Instead, think more broadly about “methods utilized to generate profit.” These methods can range from indirect methods in which information contributes to some eco-nomic gain, to more direct methods with which information may generate an actual revenue stream.

Indirect methods of information monetization can include using data to reduce costs, improve productivity, reduce risks, develop new products or markets, and build and solidify relationships.

Indirect methods for monetizing information abound, and we do them daily and for most processes. The problem is that most organizations don’t measure the information’s economic impact. So how can they claim they’re monetizing it? They can’t, really. In part III, I’ll describe how to measure the economic impact of information. An inability to measure information’s top or bottom line impact shouldn’t stop you from using it, but in reality it probably does limit how well, how broadly, and how creatively you deploy it. So let’s put a stake in the ground: You are indirectly monetizing information only if you are measuring its economic benefits. This may not quite be an aphorism, but it’s certainly useful.

Consider March 5, 2015, when Citigroup added $9 billion in market capitalization and a dividend increase of 500%. That morning the U.S. Federal Reserve had released the results of the second phase of its annual Comprehensive Capital Analysis and Review (CCAR) stress tests on major banks.5 Citigroup had passed with flying colors—the cleanest test of top U.S. banks—by correlating and analyzing 2,600 macroeconomic vari-ables with revenue streams from dozens of business units with the help of machine intelligence technology from Ayasdi.6 They had uncovered variable

14 INFONOMICS

permutations which were difficult to identify using basic business intelli-gence approaches, and reduced this process from three months to two weeks. In using information to demonstrably reduce risk and improve compliance, Citigroup had added billions in market value.

Or consider how the Carolinas-centered mid-range upscale depart-ment store chain Belk is monetizing information to measurably optimize merchandising, marketing, and real estate investments. By blending and analyzing data from its millions of customers across thirteen different databases, along with census, ethnicity, and population migration data, with the help of self-service data integration and analytics software from Alteryx, it developed attrition models to analyze customers by spend level, purchase history, and other dimensions to identify and target high-value multi-channel customers. In doing so, Belk has increased diverse and non-diverse spend, increased the number of multi-channel customers, opti-mized assortment plans and store format, and improved store opening and closing decisions. As a result, it has almost doubled the number of online and in-store customers.7

Just as monetizing any other kind of asset doesn’t necessarily involve sell-ing it, monetizing information doesn’t mean selling or licensing it, either. In fact, the opportunities for indirectly monetizing information arguably are broader than those for monetizing it directly. You are only limited by your imagination . . . and your ability to measure and attribute the benefits.

Get More Than Cash for Your Information

Cash may be king, but the bad news is that the king himself knows you have it. In other words, it’s taxable. Exchanging your information for monetary remuneration—that is, selling or licensing it—may seem the easy way to go about transacting with information, but it is rarely the best method. Not only are cash transactions highly visible on income statements, but money is a mere proxy for or derivative of other kinds of value. Instead, consider getting what you really want in return for the information. With the right trading partner, you will end up receiving more economic benefits from your information than you would from having them write you a check.

Why Monetize Information 15

Primarily, look for opportunities to get favorable terms and conditions, or discounts, from suppliers in return for information about how you or your customers are using their products.

Grocery stores have been facilitating both sides of this for decades.Most of us regularly swipe our loyalty cards at the grocery store and

watch as the register automatically discounts certain items. But is it really a discount? Of course the grocer advertises that we will receive discounts by signing up for and using a loyalty card. But is it really because we’re loyal? Do we get bigger discounts the more often we shop? No. Perhaps the loyalty card is encouraging loyalty, but we can obtain one from any and all major grocers, then use them whenever we want. Therefore, it seems there’s some-thing more going on here than just a loyalty-based discount.

In reality, “loyalty-based discount” is secret retail code for “free stuff in exchange for information about you and your purchase.” More than your loy-alty, grocers and other merchants with similar programs are after your data.

Over three decades ago FedEx’s CEO Fred Smith proclaimed that “The information about the package is just as important as the package itself.”8 Since then, this realization and mindset has swept across every corner of commerce. Recently, we see companies purely in the business of accumulat-ing and selling data with stratospheric valuation multiples. The grocer “loy-alty” example has been around for decades, but it is a business-to-consumer (B2C) model. Some businesses leaders today are realizing that this model can be extended to business-to-business (B2B) scenarios, as well. Indeed, I have consulted to businesses in nearly every sector from telecommunications to energy to manufacturing to financial services on forming internal efforts to package, productize, price, and promote their own information assets. To extend Fred Smith’s proclamation, in some situations perhaps information about the customer is just as important as the customer himself.

Tax advantages or not, bartering with (or for) data opens up new avenues of commerce, even for traditional businesses. Information has evolved from being a business byproduct to a business performance fuel, and now to a new legitimate accepted form of legal tender. Leaders who cultivate, man-age, and are prepared to leverage this new-age currency will increasingly have an increasing array of revenue streams and commercial options available to their organizations.

16 INFONOMICS

Think Beyond Your Own Data

Most business and IT leaders I speak with who are interested in “monetizing our information” unwittingly squeeze in that unfortunate and limiting word: “our.” Ownership implications aside, which I address in chapter 12, you should be thinking about how to collect data from external sources—particu-larly sources devoid of commercial restrictions. This is as true or more so for business analytics initiatives as it is for information monetization. The incre-mental value of exogenous data is largely untapped by most organizations.

You may not have noticed, but in the previous examples (i.e., Citigroup and Belk), they weren’t just using their own data. Rather they were ingest-ing, integrating, and incorporating exogenous data with their own data. Citigroup snags hundreds or thousands of macroeconomic variables, while Belk pulls in census and other population data.

Insights using just your own data are just that, “insights.” They fail to put your operations, your situation, or your future into the global context where it belongs. Even more valuable are “outsights.” Microscopes are great for diagnosing, but telescopes provide the ability to anticipate and plan.

In chapter 3 I discuss how to understand and curate the range of exog-enous information sources that can be valuable for both direct and indirect monetization, such as open data, syndicated data, social media data, and others. It isn’t easy. Just knowing what information is out there is difficult enough, even before you try to sort out which data is potentially useful, then integrate it. Data scientists are gaining these information curation skills, but specialists are in desperate need by many organizations. Do you have a dedicated information curator? If not, perhaps you should.

Uncover Your Hidden Treasures

Another objection we often hear about monetizing data is “Who would want our data? It’s proprietary to our business operations.” Most of your partners, suppliers and customers are either in a similar business to yours, or no more than one industry removed, as it were. Take a look up and down your supply

Why Monetize Information 17

chain. Why wouldn’t they find some of your information valuable in some way or another? In raw form, it may not be immediately usable. But sitting idly in your databases it’s of no benefit to anyone else whatsoever.

Later on I’ll cover data preparation, ownership, and privacy as part of the information monetization method, but suffice it to say, where there’s a will there’s a way to share information in some form with someone else who wants it. The bigger issue is that they may not know you have information useful to them, and even if they did, they wouldn’t know how to use it. You may have to help develop the market for it. No disrespect, but you prob-ably don’t even know yourself what information you have throughout your organization. Unfortunately, very few organizations have anything near a comprehensive inventory of their information assets.

Regardless, your enterprise architects or CDO, if you have one, should initially be tasked with identifying external opportunities for monetizing your information assets.

Although government organizations in the U.S. are prohibited from sell-ing data outright due to the Freedom of Information Act, they’re getting better all the time at helping others monetize it in ways that benefit the public. The City of Chicago, for example, compiles data on vacant build-ings for various reasons including compliance, public safety, and taxation. But the city also makes this data available via geographic and other overlays like neighborhood so real estate developers can identify prime locations to consider for renovation. It’s an economic win for the city, for the developers, and for the city residents.9

Stop Giving It Away

Many business and IT leaders admit their companies have established an unfortunate precedent. Over the years, they have offered up their data to business partners, suppliers, or even industry associations—all for naught, or for very little in return.

“We’ve slid so far down that slippery slope of freely sharing our data with suppliers, I don’t know how we could ever climb back up,” one retail

18 INFONOMICS

executive confided to me. “We’re leaking data, which in today’s world means we’re leaking money.”

Of course you want to be in the good graces of those throughout your business ecosystem. But you have something they want or crave, and yet you have been giving it away all these years.

The good news is that most business have started amassing ever more information—more granular or detailed information on sales, customers, processes, and so forth—which presents an opportunity to demarcate what you’re willing to offer gratis versus the information you extract a premium for in return.

Take Advantage of Information’s Unique Characteristics

The unique economics of information offer another set of reasons why infor-mation is ripe for monetization. Information has certain characteristics not found in other kinds of assets that render it able to generate value in new and interesting ways.

When compared to other kinds of assets, information has a variety of unique characteristics which make it a resource ripe for monetization:

• Information is highly reusable,• Information is liquid in a wide variety of contexts,• Information is not considered a capital asset,• When bartered, information isn’t taxed,• Information is easily replicable,• Information can be transferred easily and instantly, and• Information has exponential benefits.

Information’s Reusable Nature

Order a pizza. Then eat it. Unless maybe you have had too much beer with it or the sausage was undercooked, you will never see it again. If you want

Why Monetize Information 19

another pizza, you have to order or make another one. Not so with informa-tion. When information is consumed it doesn’t disappear. In fact it remains unaltered. It is non-depletable.

Certain purpose-built mechanisms such as those in the popular messag-ing app Snapchat delete information by design after a period of time. And business systems can be architected to move or archive or delete data based on some heuristics. But generally, when viewed or searched or otherwise processed—as is its nature—information remains perfectly intact.

Similar to other kinds of intangibles, particularly patents, this makes information especially reusable or re-monetizable. Why license or barter with or analyze information just one way or just one time when it is practi-cally begging to be deployed over and over, and simultaneously by multiple individuals or processes? Economists call this kind of asset non-rivalrous.

This is the foundation of the economic models for publishers, news orga-nizations, data brokers, and even research companies like Gartner.

In chapter 13, I will deal with the economic concept of diminishing mar-ginal utility in the context of information assets, but for most practical purposes it makes perfect sense (and dollars) to monetize your information in a variety of ways. Unfortunately, since information is not yet considered a balance sheet asset, most business leaders don’t think of it as an asset with this incredibly unique characteristic. Therefore they forego much of its value potential.

Let the Information Flow

True, most information generated or collected by your business is confiden-tial, proprietary, and specially structured for your business, your applications, your employees, and perhaps your customers and select business partners. As it should be. But increasingly, much information has a certain degree of liquidity. While not as liquid as cash, and it never will be, certain kinds of information from individual’s preferences and demographics to internet of things (IoT) sensor or operational data has a viable market—or at least holds value for some organizations somewhere. A Temple University student study-ing statistics and economics, Isaac Silver, put it succinctly to me: “Information is more versatile because it’s more contextual,” meaning it can be applied in a

20 INFONOMICS

wide variety of contexts. With money you can buy things; with information you can attain insights, relationships, performance, and things.

Identifying information licensees or developing a market, and preparing information for use by others, may not be your core business, but it shouldn’t be overlooked. Even data you capture or generate which you may not find particularly useful in the context of your own business may be economically beneficial to others. And as you develop future applications and business processes, it’s not a bad idea to consider what ancillary information you could capture which might be valuable to others as well.

But don’t just think about external monetization. Information can be a form of capital useful to your own business units or departments beyond that which generated or captured it initially. Tear down the silos and elimi-nate the inhibiting notion of “data ownership” within your organization, as I assert in chapter 11. Then you’ll find information can be deployed in even more high-value ways.

A Capital Offense

It may offend one’s sensibilities that information isn’t considered a capital asset by current accounting standards and regulatory bodies—e.g., generally accepted accounting principles (GAAP), American Institute of Certified Pub-lic Accountants (AICPA), and Financial Accounting Standards Board (FASB). But instead of whining about it or scratching their heads why information is non-capitalizable, business leaders should be taking advantage of the obfusca-tion it offers and incorporate this “feature” into their business models.

Only under rare circumstances do the public or your competitors get purview into what information you collect, generate, barter for, license, or otherwise share with or receive from others. Nor can they gather how you are putting that information to work without reverse engineering observable or reported business activities. This gives information a unique property in rela-tion to other kinds of assets, and a comparative beneficial posture in obscuring the intricacies of your business from competitors. For the most part, even as a public company, you can publish an entire annual report without disclosing anything about the information assets you’re collecting, generating, or using.

Why Monetize Information 21

How much is Google’s, Facebook’s, Uber’s, or even Walmart’s or Mon-santo’s information worth? No one really knows.10 And exactly what infor-mation do they have and what are they doing with it? Other than for privacy regulation compliance reasons, they don’t have to disclose that to anyone.

A Taxing Situation

As discussed earlier, barter transactions are recorded by both parties sepa-rately based on the value of the good or service received. According to gen-erally accepted accounting principles (GAAP), discounted transactions are recorded at the value of the money exchanged, not the cost of goods. Cash is king in these transactions. Yet there’s no requirement that both parties perceive the same recorded value for what they have received. However, if we presume or demonstrate that the grocer in the example earlier is monetizing the incremental data received by virtue of a personally identifiable loyalty card being used, then the transaction (or part of it) ostensibly becomes a barter transaction.

So here’s where it gets interesting: information has no value, according to the accounting profession. That’s right, despite what 80% of business execu-tives surveyed by Gartner contend,11 a company’s information assets are not assets at all—at least and quite conveniently by neither the accounting profession nor government revenue services (e.g., the U.S. Internal Revenue Service [IRS]). Even for companies such as ACNielsen, S&P, and D&B that long have been purveyors of data, and more recent ones such as Google, Facebook, and Twitter, any valuation of their vast storehouses of information assets is nowhere to be found on their balance sheets.

Therefore, if companies receive information in return for providing any good or service, arguably the value of the transaction for accounting and tax purposes could be recorded as zero or non-existent altogether. Since information has no balance sheet value, in barter transactions it may be considered non-taxable by the receiving party. Now you may not want to find yourself in a position of arguing this in front of a revenue service audi-tor or tax court, but on the other hand, you may want to consider using information as a form of currency in certain situations. And companies in

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the business of licensing information (e.g., credit bureaus, data brokers, news outlets, social media companies, research firms, etc.) of course for-mally book these transactions. Tax advantages or not, as I contended earlier, bartering with or for data opens up new avenues of commerce, even for traditional businesses.

Endless Copies

Just as information isn’t depleted when consumed, for better or worse, infor-mation is easily replicable. Not only does it not disappear when consumed, endless copies of it can be made to use for an infinite array of purposes, again without affecting the original. Moreover, copies are generally indistinguish-able from the original. Yes this causes endless heartburn for chief security officers and chief data officers, but it also affords opportunities well beyond those of physical or financial assets.

Imagine if the information in a book or magazine could only be sold once and in the possession of only a single individual at a time. Thanks at first to scribes, then the printing press, then moveable type, then punch cards, then floppy disks, and now the internet, information can be duplicated and made available to multiple parties with effortless ease. When considering how to realize the potential value of your information assets, perhaps it’s a hindrance to think of them as a single dataset. Instead, think of them as the contents of a book or magazine and how making copies of it for others (both those inside and outside your organization) could be mutually beneficial.

This is the basis of the business models of real estate and automobile sales aggregators like Zillow and AutoTrader, and how the New York Stock Exchange was able to introduce an entirely new line of business to monetize its information: its Market Data Analytics Lab, which makes available mar-ket data and analytic tools for curious quants.

A History of Transferability

Along the lines of information’s replicability is how easily it can be trans-ferred. Making copies and transporting it are different but certainly related.

Why Monetize Information 23

In the era before electronic data, information was heavy. It was printed on stone tablets, then wood and paper. And yes, some types of tacit information were “transported” orally.

One Reddit contributor with a bit too much time on his hands esti-mated the Library of Congress and its millions of books, manuscripts, pho-tographic images, sheet music, vinyl records, magazines and comic books, maps, and government publications at about 16,000 tons of information. But he also estimated the informational contents of the library at about 20 terabytes of uncompressed text requiring an optical drive of only about 15 pounds today.12

The point is that information today has marginally low information carrying costs and transportation costs. And these costs are plummeting continuously—not just the storage costs, but also the bandwidth costs for sending information anywhere on the planet (or beyond) at any time. Com-pare this to the inventory and distribution cost of almost any kind of physi-cal asset. Indeed, invisible transistors have replaced bulky vacuum tubes, but most physical assets—from machine tools to automobiles to oil refineries to raw materials like concrete or iron ore—haven’t realized the order of magni-tude reduction in storage and transportability expense that information has over any time horizon.

Yet, many business models and operating models still fail to capitalize fully upon, or be architected around, the low and rapidly lessening costs of storing and transporting information. This characteristic of information represents a significant challenge for many established and entrenched com-panies. However, it’s a tremendous opportunity for business leaders who are looking to invent new disruptive business models, or entrepreneurs looking to invent new digital businesses.

Netflix is a classic example of this awareness and opportunism: first iden-tifying the low storage cost and high transportability of DVDs via the postal system, then capitalizing on the improved storage and transportability of streaming films over the internet. Where’s Blockbuster today? Disintermedi-ated by data. The only store I have seen in the past five years is in Anchorage, Alaska, where internet access is still unavailable or spotty for some in the surrounding area.

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New Business Models and Profitability

The long-term value of IT with respect to business investments lies not in the features and functions of a proposed technology or solution, but in the value of the information that the technology or solution creates to drive new business models and profitability. Most information assets have significant potential utility well beyond the application that produces, captures, and/or initially consumes them.13 Even if their future uses and value are unknown, their potential ancillary value likely outweighs the cost of generating/ collecting and managing it. Also keep in mind that information’s realized value may grow exponentially, via what’s known as the “network effect.”14

This principle implies that the value of the original business or IT invest-ment is potentially greater than its core benefits. It should also include the value of the data it generates as well. Therefore, project justification/return on investment (ROI) models should consider the derivative or alternative potential value of these information assets across an extended lifecycle.

Because information has this definitive derivative value (along with the aforementioned diminishing carrying costs), enterprise architects should make it their business to ensure new or upgraded solutions maximize the volume, variety, and volume of information collected or generated. Yes, even if the immediate benefits are only speculative. Only occasionally, as in the collection of personally identifiable information (PII), will the risks of col-lecting additional information possibly outweigh its potential benefits.

The CDO of a major financial services firm shared with me this principle in action:

As we plan our ERP [enterprise resource planning] implementation, we take a look at every data element in the design, to determine the future benefits of being able to analyze or monetize that data. We also look at every data element not in the plans that we could be captur-ing, to see what potential benefits we’re sacrificing.

Data management and governance expert, and head of services delivery with First San Francisco Partners, John Ladley, acknowledges that the general

Why Monetize Information 25

failure to do just this has been a “foundational flaw in IT and data manage-ment for years.” He proclaimed to me, “As long as I see development teams cranking out hundreds of apps and services without considering the ancillary uses of data, I will have full employment!”15

Organizations that monetize their information assets outstrip their rivals by using it to reinvent, digitalize, or eliminate existing business processes and products. Yet 50% of 249 respondents in an online Gartner poll said their company is not monetizing information in any way. Thirty-one percent said they are doing so indirectly by measuring the economic benefit of data through better decision making. However, in an indication of executive dis-connect on the topic, another study revealed that 60% of senior executives claim they are “already generating revenue from the information they own.”16

As you consider how to combat the myths discussed in this chapter and lever-age information’s unique capabilities, next let’s dive into examples of how orga-nizations across industries are monetizing information for a range of business benefits. Chapter 2 is designed to inspire information-driven innovation, and help you build a business case to monetize information in your own organization.

Notes

1. “Thrales End—Find Us,” Thrales End—Find Us, accessed 09 February 2017,www.thralesend.co.uk/find.html.

2. Adam Satariano, and Alan Bjerga, “Big Data Technology Is BoostingFarmers’ Productivity,” Bloomberg.com, 09 June 2016, accessed 09 Feb-ruary 2017, www.bloomberg.com/news/articles/2016-06-09/big-data- technology-is-boosting-farmers-productivity.

3. www.nytimes.com/2014/12/01/business/working-the-land-and-the-data.html.

4. Throughout this book I will use the term “information” to refer to any and allforms of data or content, structured or unstructured, raw or processed. How-ever, tacit information (a.k.a. “knowledge” or “wisdom”) is a different topicaltogether as it does not meet the conditions of a true asset, and therefore can-not be monetized, managed, or measured as one. Also, in most circumstances Iconsider the “data versus information” argument to be pedantic, and phrasing

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like “turning data into information” to be trite marketing speak. As I’ll discuss, information’s potential value is more of a continuum. That said, you certainly will be able to use some of the concepts herein to put some meat on any “data versus information” notions, should you wish.

5. “Citigroup Has Cleanest Fed-Test Pass of Wall Street Rivals,” Bloomberg.com, 11 March 2015, accessed 09 February 2017, www.bloomberg.com/news/articles/2015-03-11/citigroup-has-cleanest-stress-test-pass-of-top- wall-street-banks.

6. Ayasdi, “After Yesterday, CCAR Less Stressful for Citigroup,” Ayasdi,16 October 2015, accessed 09 February 2017, www.ayasdi.com/blog/bigdata/yesterday-ccar-less-stressful-citigroup/.

7. Alteryx Follow, “Dial Up Loyalty and Experience with Multi-Channel Cus-tomer Analytics,” Share and Discover Knowledge on LinkedIn SlideShare,14 January 2014, accessed 09 February 2017, www.slideshare.net/Alteryx/dial-up-loyalty-and-experience-with-multichannel-customer-analytics.

8. Gerald Hampton. “Business Management—Perfect Package,” Business Man-agement, 01 June 2007, www.busmanagement.com/issue-9/perfect-package/.

9. “Vacant and Abandoned Building Finder—Chicago,” Vacant and AbandonedBuilding Finder—Chicago, accessed 09 February 2017, http://chicagobuildings.org/.

10. Well, actually I’ll show you how to calculate the value of Facebook’s informa-tion in chapter 10.

11. My informal discussions with executives at Gartner events from 2011–2015.12. “DAE Know the Weight of the Library of Congress If Not This May Be

It! • /r/DoesAnybodyElse,” Reddit, accessed 09 February 2017, www.reddit.com/r/DoesAnybodyElse/comments/dd90n/dae_know_the_weight_of_the_library_of_congress_if/?st=ivuf553s&sh=34087f7e.

13. The concept of how the future value of information can be used to fund cur-rent initiatives is explored in “How CIOs and CDOs Can Use Infonomicsto Identify, Justify and Fund Initiatives,” Douglas Laney and Michael Smith,Gartner, 29 March 2016. www.gartner.com/document/3267517.

14. The network effect is a phenomenon in which a product or service gains addi-tional value as more people use it. It’s also called a network externality ordemand-side economy of scale in economic parlance.

15. John Ladley, email to author, 17 December 2016.16. “The Business of Data,” The Economist Intelligence Unit Ltd., 2015.

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